Coal not incompatible with increased renewables: Frydenberg

Neither the Paris climate accord nor the International Energy Agency's bleaker outlook for coal has dented federal Resources Minister Josh Frydenberg's belief in the strong future for the energy source both for domestic power generation and for exports.

Mr Frydenberg said coal was not incompatible with increased use of renewable energy and would continue to play a vital role in power generation in Australia. Coal was vital to ensure the transition to a cleaner electricity generation sector occurred smoothly and without adding excessively to costs, the minister said, pointing to the disruption in the power market in South Australia as an example of the risks.

He said a transition was already underway in Australia's electricity sector, with the revised Renewable Energy Target of more than 23 per cent set to drive a doubling of large-scale renewable energy between 2014 and 2020.

"It is important that this transition takes place in a smooth and cost effective way, without interruption to electricity supply," the minister said.

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"With this in mind, coal-fired power plants will continue to play an important role in generating electricity in Australia."

Australia is widely expected to have to increase its targets for emissions reductions in order to play its part in the global commitment to limit average global warming to less than 2 degrees. The pledge has triggered renewed calls for the government to consider facilitating a managed closure of one or two of the country's most carbon-intensive power stations in order to make room for new renewable generation capacity, while environmental groups have urged the government to start planning for a future without coal.

But Mr Frydenberg gave no sign the government saw the need to step in to accelerate a move away from coal in the electricity sector.

"The government does not consider maintaining Australia's coal industry and increasing Australia's renewable energy use as being mutually exclusive goals," Mr Frydenberg said.

"Undoubtedly, coal-fired electricity generation will continue to play an important role providing baseload electricity for Australia's energy market."

He noted that while coal currently provides more than 60 per cent of the country's electricity needs, the Renewable Energy Target and the target of increasing energy productivity by 40 per cent by 2030 will make a "significant contribution" to Australia meeting its 26-28 per cent target for emissions reductions by 2030.

But Mr Frydenberg noted the IEA's estimate that by 2020 over 35 per cent of the world's electricity would still be sourced from coal. Australian exports of coal low in sulphur and ash were well placed to capture the benefits of a drive to lower emissions coal power generation, he said.

"Australian coal exports will continue to be particularly important in our region, where coal demand will continue to grow as countries like India seek to accelerate their economic development and provide electricity to more than 240 million people for the first time," he said.